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problem: Einstein Company currently has 800,000 dollars owners’ equity and no long-term debt. Its expected income for 2009 is 100,000 dollars and it is object to a twenty percent tax rate. Determine the Einstein’s planned return on equity? If Einstein issues 200,000 dollar in debt it anticipates that the interest expense will be 14,000 dollar. However it expects to use this money and increase sales such that the income before interest and taxes will be 150,000 dollar. If Einstein issues the debt determine its planned return equity?

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